Hindenburg Research

Shares tumble after short seller accuses company of overstating user counts and facilitating fraudulent transactions.

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Hindenburg Research on Thursday disclosed short positions in Block Inc and alleged that the payments firm led by Twitter co-founder Jack Dorsey overstated ...

Hindenburg invests its own capital and takes short positions against companies. ET, short sellers have made over $400 million in paper profit, according to data from financial analytics firm Ortex. So, you know, I think that's the most damaging part of the report," he added. And it doesn't seem like that would be something that they would allow," said Christopher Brendler, senior analyst at D.A. "What I am really concerned about is the Cash App, accusations of fraud, multiple accounts, opening accounts and fake names. Based on the session's 20% price move, as of 9:55 a.m.

Block shares plunged after noted short seller Hindenburg Research said the company's flagship Cash App facilitates crime and lacks strong compliance ...

"We intend to work with the SEC and explore legal action against Hindenburg Research for the factually inaccurate and misleading report they shared about our Cash App business today," the company said in a press release. We will not be distracted by typical short seller tactics," Block added. The report alleges that the lockdowns "posed an existential threat" to Block's critical merchant services business. [responded](https://www.businesswire.com/news/home/20230323005636/en/) to the Hindenburg report later on Thursday. To test the theory, the short seller opened accounts in the name of former President Donald Trump and Tesla CEO Elon Musk, and then obtained a Cash App card, called the Cash Card, under the "obviously fake Donald Trump account," the report said. [Jack Dorsey](https://www.cnbc.com/jack-dorsey/)'s [Block](/quotes/SQ/) plunged 19% after short seller Hindenburg Research announced Thursday that the payment company was its latest short position, alleging that Block allowed criminal activity to operate with lax controls and "highly" inflates Cash App's transacting user base, a key metric of performance.

Block was accused by Hindenburg Research of facilitating fraud, avoiding regulation and misleading investors with inflated metrics.

Connect with Timothy on [[email protected]](mailto:[email protected]) Hindenburg said it has placed a bet against the stock. Six months later, the shares were down 26 per cent on average. Anderson’s firm describes itself as a forensic-research outfit operating with its own capital. Shares in Block were 14.9 per cent lower to $US61.78 at 2.10pm in New York, off its early session lows. Hindenburg’s Twitter following has doubled to surpass 500,000.

The report claimed Block's business began shifting in 2020, allowing fraud to occur through many newly activated Cash App accounts and a $1 billion windfall ...

“Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price,” said Block. "Like traditional financial services companies, [Block's] key focus seems to be on dressing up predatory loans and fees as revolutionary products, avoiding regulation and embracing worst-of-breed compliance policies in order to profit from its facilitation of fraud against consumers and the government," said Hindenburg. The report suggests that Block insiders — including co-founders [Jack Dorsey](https://cointelegraph.com/top-people-in-crypto-and-blockchain-2023/jack-dorsey) and James McKelvey, chief financial officer Amrita Ahuja and Cash App manager Brian Grassadonia — had sold more than $1 billion of the firm’s stock, whose price rose “on the back of its facilitation of fraud.” Interviews with former employees by Hindenburg suggested that roughly 40% to 75% of reviewed accounts were fake, involved in fraud, or tied to a single individual. “Even when users were caught engaging in fraud or other prohibited activity, Block blacklisted the account without banning the user.” [called](https://investors.block.xyz/news/news-details/2023/Blocks-Response-to-Inaccurate-Short-Seller-Report/default.aspx) the report “factually inaccurate and misleading,” adding it planned to explore legal action.

If you buy low and sell high, chances are you'll be richer and everybody will be happy. Sell low after borrowing high — what's known as short selling — and ...

Many authorities dislike short selling — a former head of the New York Stock Exchange described the practice as “icky and un-American.” The US cracked down on short selling during the Great Depression and joined the likes of the UK, Germany and Japan in limiting short selling or banning it during the financial crisis that erupted in 2008. The practice can be perilous: Block said he stopped shorting Chinese companies for a time because “tattooed gangsters” came looking for him. Jesse Livermore, known as the “King of the Bears,” made a fortune shorting railroad operator Union Pacific shortly before the 1906 San Francisco earthquake. But it follows the standard procedure for a so-called activist short: After researching a potential target, Hindenburg places a bet that the stock will decline, then trumpets its research publicly, using social media to get the message out. Napoleon labeled short sellers of government securities “treasonous.” Short selling stocks — as opposed to tulips — is particularly challenging because equity markets have a long-term track record of moving up rather than down. The activist firm said it was betting against the stock and published a report saying that Block’s Cash App was probably helping fraudsters take advantage of US government stimulus programs during the height of the Covid pandemic. Although activist shorts have been calling out companies for decades, their numbers have swelled with the rise of social media as a platform for disseminating theories and analysis. During the volatility that accompanied the onset of the pandemic in 2020, bans were imposed for several months in France, Spain, Italy, Belgium, Greece, Austria and South Korea, while the European Securities and Markets Authority ordered traders to disclose more information about short sales. It gained more prominence in February when it issued a 100-page report accusing the Indian conglomerate Adani Group of using a web of companies in tax havens to inflate revenue and stock prices, even as debt piled up. Sell low after borrowing high — what’s known as short selling — and you may be rich, but odds are that quite a few people will be displeased. What is banned either partially or fully in several markets is so-called naked short selling — betting on a stock’s decline without having first borrowed the shares.

Block Inc. said it will explore legal action against Hindenburg Research after the short seller issued a report alleging the payments company facilitated ...

Shares of the payment company, formerly known as Square, plunged after Hindenburg Research accused it of facilitating crimes.

In other words, it looks for corruption or fraud in the business world, such as accounting irregularities and bad actors in management. The report also claims that Block deliberately ignored evidence of fraud, permitting single accounts to accept unemployment payments on behalf of multiple people or from different states, without verifying addresses. In the case of Block, Hindenburg alleges the company "wildly overstated its genuine user counts and has understated its customer acquisition costs," while failing to stop users who were engaged in fraud on its platform. "The company's 'Wild West' approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams, then extract stolen funds quickly." "Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price," Block said. Shares in the conglomerate have suffered massive losses since Hindenburg issued its report alleging fraud and other malfeasance.